Buffett is worried about Fed policy; “There are an awful lot of people who want to get out of a lot of assets if the Fed is going to tighten. Who knows how it will play out.”

Buffett is worried about Fed policy

By Chris Isidore @CNNMoneyInvest March 4, 2013: 9:09 AM ET

NEW YORK (CNNMoney)

Investor Warren Buffett said his biggest worry about the Federal Reserve’s policy of buying assets is how the markets will react once the central bank starts selling its holdings.

In an appearance on CNBC Monday, the chairman of Berkshire Hathaway (BRKA,Fortune 500) pointed to the sell-off in stocks a couple of weeks ago after the Fed’s minutes suggested some members supported slowing asset purchases from their current pace. He said that was just a small preview of what could be extreme market reaction once the Fed actually does start selling the trillions in Treasuries and mortgages it now holds. The Fed is buying $45 billion of Treasuries and $40 billion of mortgages each month through a policy known as quantitative easing.

“All over the world everybody that manages money is waiting to catch the signal that the Fed is going to reverse course,” he said. “I think they’re on a hair trigger. There are an awful lot of people who want to get out of a lot of assets if the Fed is going to tighten. Who knows how it will play out.”Buffett generally had praise for Fed Chairman Ben Bernanke.

“I think the guy has been absolutely terrific as Fed chairman, and I’m sure he’s thought a lot about how he unwinds this,” he said. “But I don’t think it’s totally predictable what will happen when it does happen.”

Buffett also said he understood the policy of buying assets in an effort to spur the economy, as gridlock in Congress has left it to the Fed to try to spur greater economic growth.

“Very cheap money makes things happen,” he said. “I think Bernanke has carried the load.”

Buffett was very critical of the negotiations over the federal budget that led to thesequester budget cuts. But he said he doesn’t think the cuts will cause enough of a problem that the economy will fall back into recession, despite Bernanke’s warnings last week that the cuts would be a “significant” burden on the economy.

Buffett said Berkshire Hathaway’s own investment plan won’t be reacting to any changes in Fed policy. He said the company’s investments are based on company fundamentals, not macroeconomic issues.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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